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Dollar Threshold for Competition

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At what dollar value do you require either competition or justification to single/sole source? My company uses the micropurchase threshold based on FAR 13.202-2 that states: "(2) Micro-purchases may be awarded without soliciting competitive quotations if the contracting officer or individual appointed in accordance with 1.603-3 ( b ) considers the price to be reasonable. " To me this implies that purchases over the micro purchase threshold require competition. However, others have cited to me the FAR 52.244-5 "Competition in Subcontracting" only applied over the SAT or under a competitive FFP or T&M contract. Thoughts?

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The rules in FAR about competition do not apply to contractors, so do not bother citing FAR. The rules that apply to contractors are in the clauses of their contracts. I know that DCMA pushes contractors to comply with FAR rules, but that is a different problem. Contractors are not legally obligated to do so.

If a contract contains the Competition in Subcontracting clause, FAR 52.244-5, then the contractor is bound to comply. That clause makes no mention of dollar thresholds for competition in subcontracting. It says:

(a) The Contractor shall select subcontractors (including suppliers) on a competitive basis to the maximum practical extent consistent with the objectives and requirements of the contract.

(B) If the Contractor is an approved mentor under the Department of Defense Pilot Mentor-Prot?g? Program (Pub. L. 101-510, section 831 as amended), the Contractor may award subcontracts under this contract on a noncompetitive basis to its prot?g?s.

Those are the rules that apply to contractors if their contracts include the clause. According to FAR 44.204( c ) the clause is inserted into contracts as follows:

( c ) The contracting officer shall, when contracting by negotiation, insert the clause at 52.244-5, Competition in Subcontracting, in solicitations and contracts when the contract amount is expected to exceed the simplified acquisition threshold, unless?

(1) A firm-fixed-price contract, awarded on the basis of adequate price competition or whose prices are set by law or regulation, is contemplated; or

(2) A time-and-materials, labor-hour, or architect-engineer contract is contemplated.

If a contract does not include the clause, then, absent some other specific binding agreement on the subject, there is no contractual agreement about competition in subcontracting and contractors should use common sense.

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Vern's post on the clause is spot on.

In the absence of a clause, in addition to common sense, does your company have written policies and procedures on the subject? If so, those would be what you are audited to.

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Thanks.

Our policies and procedures now say $3,000 and above we are require to compete or justify not doing so in writing. We are considering changing this, and that it what caused me to ask the question. We recently received CPSR approval and therefore I am a bit hesitant to make changes to our system.

If any others on the forum work for large business prime contractors, let me know what your current practices are.....

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Gents,

I want to make sure I understand your opinions...

As a prime contractor who subcontracts a large amount of the work, it is my understanding that there isn't a FAR clause that references a dollar threshold requiring a written noncompetitive justification when full and open competition is not achievable due to specific engineering or technical expertise requirements, right?

Our company policy does require a noncompetitive justification at the $25,000 threshold.

One other related question:

Would you agree that noncompetitive justifications are not required for subcontract awards under an IDIQ Prime Contract where the Prime was competed but the Task Order itself was not? In other words, if we are awarding a subcontract under a Task Order where that specific work wasn’t competed, does the requestor need to complete a noncompetitive justification? It would depend on the what's in the Prime or specific Task Order flowdowns, right? I don't believe FAR covers this, but if there is a FAR clause, please reference.

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The FAR does not require written justification for noncompetitive subcontract acquisitions, regardless of dollar value. Contractors are not required to seek "full and open competition" when awarding subcontracts. It may be that justification is required by some agency FAR supplements.

However, good buying practice and simple common sense should suggest that you prepare one anyway when you have to negotiate price, if you have a CPFF or T&M contract, or if you must obtain consent to subcontract. Government auditors and CPSR reviewers are going to expect it, and understandably so.

As for task order pricing and subcontracting, the rules are murky to most people. Again, FAR states no express rule. Use common sense. If its a CPFF or T&M task order, or if you'll need consent to subcontract, then justify sole source in writing.

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I'm curious to know how the Competition in Subcontracting clause, FAR 52.244-5, is actually applied or enforced. The qualification, "consistent with the objectives and requirements of the contract" seems to leave a lot of room for interpretation, presumably at the prime contractor's discretion. If a contractor includes a proposed subcontractor's resources, past performance and qualifications in their proposal, and an award is made partially on that basis, wouldn't this be a substantial factor in considering the "objectives and requirements of the contract"? The prime contractor would not be expected to perform a post-award competition for subcontracting at that point.

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I just received my first commerical-item SAP. While conducting market research, one of mysuggested sources asked if I would be setting aside any work for SDVOSBs. I said no as the work is already reserved for SBs above $3k but not exceeding $150k. (Our IGCE estimates the services at approx. $50K). The same source then asked if he could subcontract work under the purchase order. Common sense tells me no but I want to respond with a FAR reference as to why not. Any ideas? FAR 52.219-14 Limitations on Subcontracting refers to offers/contracts versus quotes/purchase orders.

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I just received my first commerical-item SAP. While conducting market research, one of mysuggested sources asked if I would be setting aside any work for SDVOSBs. I said no as the work is already reserved for SBs above $3k but not exceeding $150k. (Our IGCE estimates the services at approx. $50K). The same source then asked if he could subcontract work under the purchase order. Common sense tells me no but I want to respond with a FAR reference as to why not. Any ideas? FAR 52.219-14 Limitations on Subcontracting refers to offers/contracts versus quotes/purchase orders.

You can do a SDVOSB set aside if you wish. See FAR 13.003(b )(2).

There is no FAR barrier to subcontracting the work.

BTW, you would not use 52.219-14 under $150k. See FAR 19.508(e ). Also, subcontracting plans are not required from small businesses. See FAR 19.702(b )(1).

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FAR defines contract as:

“Contract” means a mutually binding legal relationship obligating the seller to furnish the supplies or services (including construction) and the buyer to pay for them. It includes all types of commitments that obligate the Government to an expenditure of appropriated funds and that, except as otherwise authorized, are in writing. In addition to bilateral instruments, contracts include (but are not limited to) awards and notices of awards; job orders or task letters issued under basic ordering agreements; letter contracts; orders, such as purchase orders, under which the contract becomes effective by written acceptance or performance; and bilateral contract modifications. Contracts do not include grants and cooperative agreements covered by 31 U.S.C. 6301, et seq. For discussion of various types of contracts, see Part 16. [emphasis added]

I wouldn't put any stock in the distinction between "contracts" and "purchase orders," insofar as it relates to clause use, however, FAR 52.219-14 is required only in contracts exceeding $150,000, so it won't apply.

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